Letter of Advice
18 Copenhagen Street
MOUNT GRAVATT QLD 4122
Mr Joe Doyle
62 Highfields Avenue
MANLY QLD 4179
9 September 2010
Dear Mr Doyle
Joe Doyle’s Investment and Business Structure Enquiry
Please find below advice on investment options for your photographic studio concerning business structure and the security of an investment in Billabong International Ltd. 1. Facts
You have come into $500,000 worth of inheritance which you wish to invest $250,000 into the initiation of a photographic studio business and the other $250,000 in shares at Billabong International Ltd. You also indicated that Paul Jones has offered to invest $50,000 in the studio wishing to have no further monetary or non-monetary input into the business. You are now unsure of what business structure to use; partnership or company, and whether Billabong will be a secure investment for your future. 2. Company or Partnership?
You indicated that safety and security are of great importance to you and Nelson & Irvine will therefore use this as the governing criteria when providing advice.
When considering the financial safety of different business structures, the level of liability should be considered. Unlimited liability is a condition in which owners of a business are personally held responsible for any debts created by the business.
A partnership has the advantages of; * Pooling of resources; Joe’s $250,000 and Paul’s $50,000 * Low cost * Little regulation (not required to submit public financial statements or lodge annual returns) * Flexible * No partnership tax
However, when considering the security of a partnership, the disadvantages raise concerns about how safe an option a partnership is; * Unlimited liability * Mutual agency – every partner is a mutual agent in the firm, any partner can bind the business to a contract within the scope of its operations. * Co-ownership of property and assets *